Mumbai: India must aim to slow inflation to an "acceptable" level of 5 per cent to 6 per cent, Montek Singh Ahluwalia, a top economic adviser to Prime Minister Manmohan Singh said, after policymakers unexpectedly boosted rates.
The Reserve Bank of India raised the benchmark reverse repurchase rate to 3.5 per cent from a record-low 3.25 per cent and the repurchase rate to 5 per cent from 4.75 per cent on March 19 after inflation hit a 16-month high of 9.89 per cent in February.
"I will consider inflation between 5 per cent to 6 per cent as perfectly acceptable," Ahluwalia said in a tele-phone interview yesterday. "The Reserve Bank's move clearly spells out that things need to be done to keep inflation under control."
The Reserve Bank may raise the reverse repurchase rate, at which it borrows from commercial banks to 4.25 per cent by the end of the year, according to Standard Chartered. The central bank's move followed Nomura Holdings and HSBC Holdings saying the RBI was "behind the curve" after inflation exceeded the rate in all G20 economies.
